More questions from the U.N.C. Lecture Series.
3. Mr. Buffett, you invest in companies with managers you say you trust and admire. I would like to know who you trust and admire in business and politics today?
He mentions CEO of Cap Cities, Tom Murphy. He also admires the great two manager combination at The Coca Cola Company, (Roberto and Don) that took the market value from $5 billion to $60 billion in about 11 years. He also includes Bill Gates. Even though he understands nothing about Microsoft's business, he has great respect for Bill Gates as a businessman.
The most important advice he gave in his response to this question is:
"I think it is crazy to work with people that make your stomach churn, and if you are in a job like that, think about changing. Working with people you don't like in a business is kind of like marrying for money, which is probably a bad idea under normal circumstance, but it's crazy if you are rich. I work with people I like, I tap dance to work everyday and work with people who are terrific."
4. Have you considered splitting the stock?
Many have asked this question of Mr. Buffett previously and Berkshire has the highest price of any company that trades on the NYSE. His response was as always classic and consistent with his previous remarks.
"At Berkshire, I want to get people as shareholders, as partners of mine, who have the same expectations, same time horizons, the same methods of measurement that I have. It's crazy to go into business with people that have entirely different expectations than you have. The only way that I can affect that, since Berkshire is a public company, is through communication and policies. Therefore, I will try to have policies so that the right kind of people with similar expectations will be attracted to the company. I would like to have people as owners who would expect to own it the rest of their lives."
Essentially he goes on to say that by not splitting the stock, he eliminates people who are in the markets to trade actively, and these are not the people he would like as partners in Berkshire.
5. Discuss some of your investment mistakes.
Buffett says that he makes the most mistakes when he has a lot of cash available. Usually cash is king, but in more recent lectures, he states that cash is only king if it is being put to good use. Cash has no value if it just sits there doing nothing; it actually loses value.
Please refer to the video for the rest of his comments.